Method of valuing a business

jmp2008

Hi! Just wondering if you have any other ideas on valuing a business apart from asset valuation method. Thanks !!!

JP

Paul C

What sort of business is it? There may be a standard way of valuing that type of business. The AAT magazine last month for example mentioned accounting practices being valued at 1 to 1.50 time’s annual fees.

I suppose the net value on the balance sheet is one way as you say but the hard part is to value brand, customer loyalty, quality of staff etc. So it’s down to what someone is willing to pay for the business? The difference being goodwill.

I seem to remember from my CIMA studies lots of complicated formulae about future earnings to value a company.....gulp

PGM

I've studied this at ACCA, theres a few ways of doing it!

Another method is to work out the PE ratio of a similar comparable company, then use that ratio and earnings of the company to work out its value.